CALGARY — The Calgary-area housing market remains one of the most affordable in Canada, according to a report released today by RBC Economics Research.

The latest Housing Trends and Affordability Report said the local market has enjoyed the best of all worlds recently: stronger home resales and home building, moderately rising prices, and attractive and improving affordability.

“Such a combination is a rare feat, but it follows years of sluggish performance in the aftermath of the area’s mid-2000s boom,” said the report. “In the second quarter of 2012, a sharp drop in the costs of utilities provided unusual help to affordability in the area. Utilities and property taxes—two small components of home ownership costs—typically do not sway affordability, but the sudden reversal of earlier electricity rate increases led to a substantial 17 per cent quarterly decline in utilities, which was more than enough to move the affordability needle.”

In the second quarter, the RBC measures edged lower for condominium apartments and two-storey homes by 0.6 percentage points and 0.4 percentage points, respectively, while the measure for detached bungalows was unchanged in Calgary.

“Such general amelioration kept housing affordability in check at some of the better levels among Canada’s largest cities,” said the report.

The RBC Housing Affordability Measure, which has been compiled since 1985, shows the proportion of median pre-tax household income that would be required to service the cost of mortgage payments (principal and interest), property taxes, and utilities.

In the second quarter, RBC measures for Calgary edged lower for condominium apartments by 0.6 percentage points to 21.6 per cent and for two-storey homes by 0.4 percentage points to 37.2 per cent. The measure for detached bungalows remained unchanged at 36.7 per cent.

RBC said significant drops in the prices for electricity and natural gas in the second quarter of 2012 in Alberta “further solidified this province’s position as the market with the lowest home ownership costs as a share of household income in Canada.”

The RBC measures eased by 0.6 percentage points for both two-storey homes and condominium apartments, while the measure for detached bungalows edged lower by 0.3 percentage points, it said.

“Alberta experienced a 17 per cent decline in utility costs, which was the largest contributor to across-the-board improvements in housing affordability in the most recent quarter,” said Robert Hogue, senior economist, RBC. “Attractive affordability and a vibrant provincial economy are providing powerful incentives for Alberta homebuyers – second quarter home resales were at the best level in five years, surging 18 per cent over the same period last year.”

The affordablity measures in Alberta were: 32.0 per cent for detached bungalows; 34.8 per cent for two-storey homes; and 19.7 per cent for condominiums.

In Canada, they were: 43.4 per cent for bungalows, up 0.2 per cent; 49.4 per cent for two-storeys, up 0.6 per cent; and 28.8 per cent for condominiums, unchanged.

How the RBC Housing Affordability Measures work

The RBC Housing Affordability Measures show the proportion of median pre-tax household income that would be required to service the cost of mortgage payments (principal and interest), property taxes, and utilities on a detached bungalow, a standard twostorey home and a standard condo (excluding maintenance fees) at the going market prices.http://www.rbc.com/economics/market/pdf/house.pdf

In its third quarter 2012 Housing Market Outlook, released Tuesday, the CMHC said the average MLS sale price in the Calgary census metropolitan area will jump from $402,851 in 2011 to $413,000 this year and then to $424,000 in 2013.

The report also said MLS sales in the Calgary CMA will increase from 22,466 in 2011 to 25,200 this year and 25,800 next year.

And housing starts in the region will rise from 9,292 in 2011 to 12,000 this year but fall back to 11,700 in 2013.

“The economy in Calgary has improved compared to the previous year and the trends that we have seen thus far are expected to continue in the months ahead,” said Richard Cho, senior market analyst in Calgary for the CMHC. “Job growth, relatively low mortgage rates and higher average earnings will all contribute to housing demand. Net migration will also be a key contributor and we have already seen some encouraging numbers at the provincial and city levels.

“Whenever we have an influx of people move to a region, naturally they are going to look for a place to live. Some will look to the rental market while others may choose to buy an existing home or build a new one. Housing demand this year will be supported by a number of different fronts.”

Cho said the resale market has moved into more balanced levels this year and that is supporting price growth.

“Supply in the existing home market has declined from the previous year while sales have increased,” he added.

In Alberta, economic growth and job creation are supporting housing demand, said the CMHC. By year-end, single-detached starts are projected to reach 17,600 units, up over 15 per cent from 2011. In 2013, single-detached starts will rise five per cent to 18,400 units.

“Existing homeowners will see the value of their property rise and this will help with move-up buying,” said the agency.

Multi-family starts will increase by 35 per cent in 2012 to 14,200 units. To reduce the risk of rising inventory in the next few years, developers will moderate multi-family starts in 2013 to 13,800 units, it said.

“In Alberta’s resale market, MLS sales will increase by 11 per cent to 59,800 units in 2012. In 2013, resale transactions in Alberta are forecast to increase to 61,000 units. MLS sales in Alberta will rise this year and next year, as employment and income growth provide the means to purchase,” said the report.

“With a transition to balanced market conditions unfolding, expect price growth to increase over the forecast period. The average resale price in Alberta is projected to rise by 2.5 per cent in 2012 to $362,200, and nearly three per cent to $372,300 in 2013. Both of Alberta’s largest markets, Calgary and Edmonton, have experienced improved market balance this year.”

Data supplied by CREB®’s MLS® System. CREB® is the owner of the copyright in its MLS® System. The Listing data is deemed reliable but is not guaranteed accurate by CREB®.

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